Rocket Lab ($RKLB) | The Frontier of the Next Economy

Rocket Lab is proving itself worthy against the industry giant SpaceX. As Rocket Lab expands its end-to-end services, could this stock share a duopoly in the next economy?

January 17, 2025
Micheal Porter

Rocket Lab isn’t just another space company. It’s an integral player in what Shay and Quench call the "next frontier" after AI and quantum computing, the space economy. As the demand for satellite launches, space systems, and interplanetary exploration rises, Rocket Lab has established itself as an early mover, carving out a duopoly alongside SpaceX. This story is more than just rockets. It's about redefining the way humanity operates in space.

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End-to-end Space Company

Rocket Lab offers a diversified portfolio of services, ensuring it’s not just a one-trick pony focused on launches:

Launch Services

Their Electron rocket specializes in deploying small satellites into low Earth orbit (LEO). It is the only reusable-capable small launch vehicle. With rapid deployment and cost-effective solutions, Rocket Lab has captured 64% of non-SpaceX launches.

Satellite Solutions

The Photon platform provides an end-to-end service, from design and manufacturing to operations, making it an attractive option for clients seeking tailored satellite solutions.

Space Systems & Components

Rocket Lab’s vertical integration allows it to design and manufacture critical components in-house. This reduces costs, ensures quality control, and minimizes reliance on third-party suppliers.

Interplanetary Missions

Beyond LEO, Rocket Lab has ambitions for missions to the Moon and beyond using its Photon platform.

Neutron Rocket (Coming in 2025)

Designed to carry larger payloads, the Neutron rocket is expected to be a game-changer, significantly expanding Rocket Lab's capabilities and revenue potential.

Rocket Lab's Moat

Rocket Lab’s moat is built on several key advantages:

  • Duopoly Status: Alongside SpaceX, Rocket Lab dominates the space economy’s launch market. While SpaceX handles large payloads, Rocket Lab specializes in smaller, more agile launches.
  • Global Footprint: Unlike SpaceX, which is primarily U.S.-based, Rocket Lab operates internationally with launch sites in New Zealand and the U.S., and strategic locations in Australia, Canada, and the UK. This diversification reduces geopolitical risks and expands market access.
  • Vertical Integration: By manufacturing most of its components in-house, Rocket Lab not only reduces costs but also controls quality and timelines, a critical factor in an industry where precision is everything.
  • Backlog and Growth Potential: With a $1 billion backlog and an under $4 billion market cap, Rocket Lab is poised to transition from a startup to a profitable mid-cap company by 2025.

The Risks

No investment is without risks, and Rocket Lab has its share:

  • Valuation and Momentum Risks: As Shay noted, when a stock trades over 100% above its 200SMA, a “rug-pull” (30% pullback) is often likely. Rocket Lab has experienced rapid price moves, and the euphoric buying could lead to volatility.
  • Profitability Timeline: Although Rocket Lab is on track to achieve profitability by 2025, any delays in reaching this milestone could spook investors.
  • Macro and Regulatory Factors: Being a small-cap stock, Rocket Lab is sensitive to macroeconomic shifts, such as interest rate changes and regulatory challenges in different countries.

The Trade

Quench and Shay have been consistent advocates for Rocket Lab, emphasizing its long-term potential. Here’s how they’ve structured their trade:

  • Primary Entry: $3.73
  • Secondary Entries: $4.20, $4.70, $5.67, $7.51, $9.75
  • Short-to-Mid-Term Targets: $5.67, $6.50, $7.50
  • Long-Term Targets: $9.75, $14.50 (61.8% Fibonacci retracement), $30

For Shay, this is a "buy-and-hold" play, with a horizon of up to two decades. Quench suggests patience for new investors to wait for pullbacks and adding at key levels.

The Story

Rocket Lab’s price action reflects its growth story. Accumulation began in May 2024, with prices ranging between $3.50 and $3.70. Over the summer of 2024, as investors anticipated rate cuts, small caps like Rocket Lab saw increased attention. The stock reached $7.36 (+97%) before consolidating at the end of August down to our secondary entry of $5.67.

From there, we awaited the next leg up over $7.50 and $9.75. Within forty days we broke through both levels and the rockets only accelerated. After just eight months, from entry to $30 target, we were sitting on +700% gains.

Shay warned against chasing the rally, suggesting that the next leg up would come after further consolidation. The price action has mirrored early-stage growth stocks like Palantir, where long basing periods lead to eventual breakouts.

The Verdict

Rocket Lab represents an unparalleled opportunity to invest in the early stages of the space economy. While its current size pales in comparison to SpaceX, its global reach, vertical integration, and diverse revenue streams position it as a formidable player in a growing industry. With profitability on the horizon and a $1 billion backlog, the company’s fundamentals are catching up to its ambitious narrative.

Shay and Quench compare Rocket Lab to Palantir in its early days: a high-conviction, long-term play that requires patience. This is a stock to accumulate during pullbacks and hold for the next two decades. While risks remain, Rocket Lab is at the forefront of the next next economy—and that’s a journey worth investing in.

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